I am a long term buy and hold investor who focuses on dividend growth stocks

Monday, February 27, 2017

14 Dividend Stocks Rewarding Shareholders With a Raise

Every week, I go through the list of dividend increases as part of my monitoring process. I usually focus on those companies that have raised dividends for at least a decade. I then focus on things like growth in earnings per share, in order to gauge the possibility of further dividend growth in the future. I also focus on valuation – even the best company in the world is not worth overpaying for. The discussion behind each company outlines my basic review process for proceeding with promising ideas or discarding them. I post it for educational purposes to my readers.
The companies that increased their dividends include:

Genuine Parts Company (GPC) distributes automotive replacement parts, industrial replacement parts, office products, and electrical/electronic materials in the United States, Canada, Mexico, Australia, New Zealand, Puerto Rico, the Dominican Republic, and the Caribbean region. The company raised its quarterly dividend by 2.70% to 67.50 cents/share. This marked the 61st consecutive annual dividend increase for this dividend king. Over the past decade, the company has managed to increase annual dividends at a rate of 6.90%/year. The company managed to grow earnings from $2.98/share in 2007 to $4.59/share in 2016. The company is expected to earn $4.77share in 2017. The stock is overvalued at 21 times forward earnings and yields 2.80%. It would be worth a second look on dips below $92/share. Check my analysis of Genuine Parts Company for more information.

Wal-Mart Stores, Inc. (WMT) operates retail stores in various formats worldwide. It operates through three segments: Walmart U.S., Walmart International, and Sam’s Club. The company raised its quarterly dividend by 2% to 51 cents/share. This marked the 44th consecutive annual dividend increase for this dividend champion. Over the past decade, the company has managed to increase annual dividends at a rate of 11.80%/year. The company managed to grow earnings from $3.16/share in 2007 to $4.38/share in 2017. The company is expected to earn $4.33/share in 2018 and $4.54/share in 2019. The stock is attractively priced at 16.70 times forward earnings and yields 2.90%. Given the lack of earnings growth over the past four – five years, and the slowdown in dividend growth, I view Wal-Mart Stores as a hold at best. Check my analysis of Wal-Mart for more information.

NextEra Energy, Inc. (NEE), through its subsidiaries, generates, transmits, and distributes electric energy in the United States and Canada. The company raised its quarterly dividend by 12.90% to 98.25 cents/share. This marked the 23rd consecutive annual dividend increase for this dividend achiever. Over the past decade, the company has managed to increase annual dividends at a rate of 8.80%/year. The company managed to grow earnings from $3.27/share in 2007 to $6.25/share in 2016. The company is expected to earn $6.63/share in 2017. The stock is fairly valued at 19.80 times forward earnings and yields 3.10%.

Albemarle Corporation (ALB) develops, manufactures, and markets engineered specialty chemicals worldwide. The Company operates through the segments, including Performance Chemicals and Refining Solutions. The company raised its quarterly dividend by 4.90% to 32 cents/share. This marked the 23rd consecutive annual dividend increase for this dividend achiever. Over the past decade, the company has managed to increase annual dividends at a rate of 13.30%/year. The company managed to grow earnings per share from $1.47 in 2006 to $3 in 2015. The company is expected to earn $3.52/share in 2016. The stock is overvalued at 26.40 times earnings and yields 1.40%. Albemarle may be worth another look on dips below $71/share.

Infinity Property and Casualty Corporation (IPCC), through its subsidiaries, provides personal automobile insurance with a focus on nonstandard market in the United States. It also writes standard and preferred personal auto insurance, mono-line commercial auto insurance, and classic collector automobile insurance. The company raised its quarterly dividend by 11.60% to 58 cents/share. This marked the 15th consecutive annual dividend increase for this dividend achiever. Over the past decade, the company has managed to increase annual dividends at a rate of 21.40%/year. The company earned $4.26/share in 2006 and earned $4.51/share in 2015. The company is expected to earn $2.55/share in 2016 and $4.15/share in 2017. The stock is overvalued at present times and yields 2.60%. I would take a pass at the company given the high valuation and lack of earnings growth over the past decade.

Old Republic International Corporation (ORI), through its subsidiaries, engages in the insurance underwriting and related services business primarily in the United States and Canada. The company operates through three segments: General Insurance Group, Title Insurance Group, and the Republic Financial Indemnity Group Run-off Business. The company raised its quarterly dividend by 1.30% to 19 cents/share. This marked the 36th consecutive annual dividend increase for this dividend champion. Over the past decade, the company has managed to increase annual dividends at a rate of 2.40%/year. The slow growth in dividends was due to the lack of earnings growth. The company earned $1.99/share in 2006, which decreased to $1.58/share by 2016. Without earnings growth, future dividend growth will be impossible. Due to this reason, I will pass on the company today, despite the fact that the stock is attractively valued at 13.20 times forward earnings and yields 2.40%.

Sempra Energy (SRE) operates as an energy services holding company worldwide. The Company's principal operating units are San Diego Gas & Electric Company (SDG&E) and Southern California Gas Company (SoCalGas); Sempra International, which includes Sempra South American Utilities and Sempra Mexico segments, and Sempra U.S. Gas & Power, which includes Sempra Renewables and Sempra Natural Gas segments. The company raised its quarterly dividend by 8.90% to 82.25 cents/share. This marked the 14th consecutive annual dividend increase for this dividend achiever. Over the past decade, the company has managed to increase annual dividends at a rate of 9.60%/year. The company managed to grow earnings per share from $4.17 in 2006 to $5.37 in 2015. The company is expected to earn $4.82/share in 2016. The stock is overvalued at 22.60 times forward earnings and yields 3%. Given the slow rate of earnings growth, and the high valuation, I would take a pass at Sempra Energy.

NewMarket Corporation (NEU), through its subsidiaries, engages in the petroleum additives businesses. The Company is the parent company of Afton Chemical Corporation (Afton), Ethyl Corporation (Ethyl), NewMarket Services Corporation (NewMarket Services) and NewMarket Development Corporation (NewMarket Development). The company raised its quarterly dividend by 9.40% to $1.75/share. This marked the 13th consecutive annual dividend increase for this dividend achiever. Over the past decade, the company has managed to increase annual dividends at a rate of 32.80%/year. The company managed to grow earnings per share from $5.62 in 2007 to $20.54 in 2016. The company is expect to earn $20.11/share in 2017. The stock is overvalued at 22 times forward earnings and yields 1.60%. It may be worth a closer look on dips below $400/share.

Telephone and Data Systems, Inc. (TDS), a telecommunications company, provides wireless, wireline, cable, and hosted and managed services in the United States. The company raised its quarterly dividend by 4.70% to 15.50 cents/share. This marked the 43rd consecutive annual dividend increase for this dividend champion. Over the past decade, the company has managed to increase annual dividends at a rate of 4.80%/year. The company has been unable to grow earnings per share in a sustainable way, since EPS went from $1.26 in 2006 to $0.39/share by 2016. The company is expected to earn $0.45/hare in 2017. The stock is overvalued today and yields 2.10%. Unfortunately, I do not understand the company well enough, which has prevented me from ever acquiring a position in it. That being said, due to its size, it could sometime become an acquisition target, the timing of which would be uncertain of course.

Texas Pacific Land Trust (TPL) holds title to tracts of land in the state of Texas, the United States. It manages these lands for the benefit of the holders of Certificates of Proprietary Interest in the Trust. The company raised its quarterly dividend by 6.90% to 31 cents/share. This marked the 14th consecutive annual dividend increase for this dividend achiever. Over the past decade, the company has managed to increase annual dividends at a rate of 9.10%/year. Texas Pacific Land Trust has a great history, and it is one of the oldest continuously traded companies in the US. The interesting point with TPL is that it has been slowly buying back stock for over 100 years. This is why it is worth researching, despite the low yield of 0.12%. This is a stock for truly long-term investors that can hold the share certificates for decades. This Business Insider story is a pretty fascinating read.

Equity LifeStyle Properties, Inc. (ELS) is a publicly owned real estate investment trust (REIT). The firm engages in the ownership and operation of lifestyle oriented properties. The company raised its quarterly dividend by 14.70% to 48.75 cents/share. This marked the 13th consecutive annual dividend increase for this dividend achiever. Over the past decade, the company has managed to increase annual dividends at a rate of 29.40%/year. Funds from Operations rose from $1.36/share in 2006 to $3.27/share in 2016. The REIT is expected to generate $3.50/share in FFO in 2017. The stock is overpriced at 24 times FFO and yields 2.50%. It may be worth a second look if drops in the $66 - $70 range, or if it drops below the range.

Westar Energy, Inc. (WR), an electric utility company, generates, transmits, and distributes electricity in Kansas. The company raised its quarterly dividend by 5.30% to 40 cents/share. This marked the 13th consecutive annual dividend increase for this dividend achiever. Over the past decade, the company has managed to increase annual dividends at a rate of 4.10%/year. The company managed to grow earnings per share from $1.83 in 2007 to $2.43 in 2016. The company is expected to earn $2.52/share in 2017. The stock is overvalued at 21.30 times forward earnings and yields 4.10%. The stock may be worth a look on dips below $48/share.

Xcel Energy Inc. (XEL), through its subsidiaries, engages primarily in the generation, purchase, transmission, distribution, and sale of electricity in the United States. It operates through Regulated Electric Utility, Regulated Natural Gas Utility, and All Other segments. The company raised its quarterly dividend by 5.90% to cents/share. This marked the 14th consecutive annual dividend increase for this dividend achiever. Over the past decade, the company has managed to increase annual dividends at a rate of 4.40%/year. The company managed to grow earnings per share from $1.34 in 2007 to $2.21 in 2016. The company is expected to earn $2.33/share in 2017. The stock is fairly priced at 18.60 times forward earnings and yields 3.40%. I will need to research this utility company in more detail, but at first glance it looks like an interesting company for further review.

Essex Property Trust, Inc. (ESS) operates as a self-administered and self-managed real estate investment trust in the United States. It engages in the ownership, operation, management, acquisition, development, and redevelopment of apartment communities, as well as commercial properties. The company raised its quarterly dividend by 9.40% to $1.75/share. This marked the 23rd consecutive annual dividend increase for this dividend achiever. Over the past decade, the company has managed to increase annual dividends at a rate of 6.50%/year. Funds from Operations rose from $5.01/share in 2006 to $11.04/share in 2016. The REIT is expected to generate $11.80/share in FFO in 2017. The stock is overvalued at 21 times FFO and yields 3%.

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